tv Whatd You Miss Bloomberg March 28, 2016 4:00pm-5:01pm EDT
are both off today. [closing bell ringing] alix: u.s. stocks closing mixed. the question is, "what'd you miss?" we asked credit suisse's chief economist james sweeney -- tracy: petrobras. how is it possible that they have seen its borrowing costs fall? 's will speak with blackrock pablo goldberg. alix: is the question in the oil world -- it is the question in the oil world. now that prices have stabilized, how quickly can cruise be beught to work -- can crews brought back to work?
we still have some markets closed overseas. volume was down 20% versus its 10 day average. within the s&p, energy was the biggest laggard, off by just 1/2 of 1%. you had consumer discretionary and materials leading in the winners category. general electric at its highest level since 2008. it was like a stealth rally. people were talking about it so much on program -- twitter that our social velocity index had an alert. i cannot find a reason for it. tracy: i did not see -- was there a reason for it? alix: a very interesting development. tracy: i wonder what's going on there. jolly take a look at currencies?
-- shall we take a look at currencies? we did see the u.s. dollar snapping a six-day rally, this again thanks to traders thinking about the potential or not potential for a fed interest rate rise. we saw some disappointing economic interest -- economic information today. ,ooking at the brazilian real that continues to rally. it is absolutely amazing. we had speculation that the president is getting closer to being impeached. we had the brazil heretical -- political corruption scandal. it just keeps going. alix: even if dilma rousseff is impeached, what's going to ?undamentally change nonetheless, all that optimism is baked into the currency. in commodities, the big story up thetoday was wheat, biggest gain in five months.
it was kind of a weather phenomenon. you have really cold temperatures in the u.s. great plains, then you had warm, dry temperatures. it's a bad mix. you saw that nice rally in wheat. tracy: we can blame el niño for the higher bread prices? alix: i'm not a meteorologist. i will look into it. tracy: on markets open in the u.s. -- bond markets open in the u.s. we've seen treasuries rising after the disappointing economic information we saw earlier. break-evens moving a little bit, people taking inflation expectation off of the table a little bit. alix: those are today possible "market minutes." -- those are today's "market minutes."
we want to take a look at the shooting on capitol hill. mark: we have been hearing that capital police officer -- that a capital police officer was shot today. the latest report said the police officer who was shot was not seriously wounded. bloomberg's erik wasson is on capitol hill with some of the latest details. take us through the chronology. what time did the shooting occurred? erik: we have some latebreaking developments from sources. it looks like the only person shot now was the alleged gunman. he was trying to enter the capital visitors center -- c apitol visitor's center when the alarm went off. there was a complication and the suspect was shot. it looked like there may have been another woman in the area who may have gotten some minor injury from shrapnel. we are still trying to get the exact word on that. there will be a press conference from the u.s. capitol police
outside of the capitol. mark: confirming what you told us, you are hearing that capitol police officer was not wounded during this altercation? erik: that's the most current information we have, but it's a developing story at this point. there have been some conflicting reports. certainly, a lot of heavy security here. a lot of tourists being evacuated. a very serious seen here at the u.s. capitol. mark: can you give us a sense of what security has been like in the u.s. capitol in the wake of those terror attacks in brussels? erik: it has been stepped up here at the capitol for years. i was a little surprised to see some of the armored vehicles out today. they have always had a heavy canine presence, heavy motorcycle unit presence. mark: do we have the all clear ol?the capita
erik: the lockdown has been lifted for staff. the visitors center remains closed. vehicle traffic has resumed on the main avenues. mark: erik, thank you so much for your reporting. there are conflicting reports policehether a capitol officer was wounded. the suspect was wounded by police. he is in custody. there are reports that a visitor at the visitor complex was wounded by shrapnel. there will be a press conference 10 to 15e next minutes. when we get more information, we will bring that to you. back to you. alix: joining us is james sweeney, chief economist of global market division at credit suisse. we got the latest read on inflation today.
i'm a little confused. we have core pce treading water at around 1.6%. core cpi is like a moonshot. 1% howap is over 1/2 of does. -- of 1%. how does this reconcile itself? i think the gap has been about the same for the past 18 to 24 months. the gap reflects the different compositions. basically, cpi has more housing in it. pce has more health care in it. health care prices were pretty stagnant, especially about year ago. rents and housing prices have been picking up. the gap is big. other measures of core inflation are rising, too. i think that's the key point. -- ishow to phrase this this slowing down in pce inflation going to give credence to janet yellen's decision not
to raise interest rates anytime soon? james: inflation is a pretty lagging indicator. ,his is a month-on-month change slightly smaller than expected. it's not a very big deal, in my view. i think the bigger news actually came from the cpi, which has -- is that inflation is rising. it is likely to keep rising. but she isay, delaying for other reasons. alix: it raises the question, will we see a greater rise in core pce later down the road? it has to eventually catch up as you have different costs feed through. tracy: this is the big question facing market and the fed. are they going to be willing to look through a rise in inflation in the short term in order to make sure the wider economy is on track? james: i don't think they will be hiking till september. even if inflation does drift up a little further, i think they will look through it.
at some point, the markets might bothoncerned it both -- if measures of inflation key moving up. later on, they may end up behind the curve. so far, there is not strong evidence of that, but that's the direction of the data. alix: there was one other big economic data point that came out this morning, consumer spending. we have seen quite a few economists marking down their off the back gdp of lower than expected consumer spending. how worried should we be, given that the u.s. consumer is supposed to be the powerhouse of the economy? james: you have to be careful with these month-on-month numbers and their volatility. we did just have an upside surprise in q4 consumer spending. it is true that these data suggest q1 consumer spending was a little lower. the average of the two is about the same. pretty solid, in my view. i would not change my view based
on this. i thought the labor market was starting to fall apart, i might worry about the outlook. i think it is too much focus on the very short term data. alix: you are chilled about chillion, chill -- are about inflation and consumer spending. still down 7.8%. if you pair that with the unemployment rate, the unemployment rate is holding steady. how does that reconcile? james: i think they are related, actually. alix: emergence? james: labor costs are starting to hit some firms in some sectors. energy and mining, which is a very provident energy, low employment -- profit-intensive, low employment sector -- this idea that consumer spending is ok, labor market is tightening, inflation is turning up is one side of the equation.
mining sector is weak, global growth has some trouble, dollar is strong, profits are pretty sluggish. both things are happening at the same time. but, i focus on either, think, from a u.s. perspective, it is really the labor market and the consumer which is the key right now. scarlet: you have been talking about -- tracy: you have been talking about lever market tightness. we have the jobs report coming out on friday. what will you be looking for? ames: it isks: -- j looking like high 100,000's again. there are big jumps from toth-to-month, but they seem be centered on that range, consistent with the unemployment rate continuing to fall, which is consistent with wages gradually firming. alix: doesn't janet yellen want to see the unemployment rate not continue to fall? inwill force the fed's hand,
some respect. for years and years, the amount of national income going into profit has been going up, the amount going into labor has been going down. required toed are get a lot more hawkish, she will tolerate a little bit of inflation if it means labor is getting better compensated. i think she is actually happy with that. a lower unemployment rate is good news until inflation is a pressing problem. although it is rising right now, it is no pressing problem. alix: you look happy on a monday. thank you very much, james sweeney. ♪
mark: i am mark crumpton was "bloomberg's -- with "bloomberg 's first word news." the suspect is in custody after being wounded. after thent occurred suspect set off the metal double-decker and displayed a weapon. -- the metal detector and displayed a weapon. there is, quote, "no active threat to the public." the event unfolded with congress at recess and lawmakers back in their districts. it happened in the visitors center of the sprawling capital x.mplex -- capitol comple staff were told to shelter in place. president obama's nominee for the supreme court met with joe donnelly of indiana and ben
cardin of maryland. week, a meeting with senator mark kirk of illinois, the first republican to sit down with judge garland. gop leaders say they have no plans to move forward with his nomination. bernie sanders has raised more than $4 million since sweeping caucuses in washington state, hawaii, and alaska on saturday. a campaign spokesman says it is one of senator sanders' largest postelection halls during the primary season -- hauls during the primary season. global news, 20 four hours a day, powered by our 2400 journalists -- 24 hours a day, powered by our 2400 journalists. alix: "what'd you miss?" the number of borrowers who are more than 60 days late rose 11% from more
than a year ago, bringing the total outstanding debt rate to five point16 -- 5.16%. david schawel, a lot of people will hear that and think subprime loans, delinquencies going up, we have been here before. what's going on? david: especially with the new movie out, "the big short," "subprime," and think we are just doing this all again. post crisis, the market for nonagency mortgages has gone away. it has gone away for a number of reasons that maybe we will talk about later. a body lift into other securitized products, auto. we have been in the zero interest rate policy for a long time. investors are looking for yields.
there are a lot of reasons they have gone into subprime auto. one, they are short duration assets. they are highly rated. investors have been much more willing to take credit risk and interest rate risk, so this checks off a lot of boxes for them. i think that the fears are a little overblown, though. alix: isn't it something like, you might default on your car payment -- house payment, but you will not default on your car payment? mark: i'm waiting -- tracy: i'm waiting for them to securitized iphone -- securitize iphones. should we be surprised we are seeing delinquencies rise? david: they are rising from very low levels. the u.s. consumer continues to be improved in terms of their financial shape. wages are rising. there are cost savings from gasoline. these are very different than mortgages.
one example to give you is, underlining collateral loan -- underlying collateral loan rates are in the high teens. the coupons on the actual subprime bonds are 2% or 3%. that difference is called excess spread. all of that extra interest is used to pay down these bonds weekly. -- quickly. investors are saying, "hey, things might be getting a little worse, but all this extra interest can cover up a lot of sins." alix: is there any argument to be made for this is a sign of a broader downturn in consumer credit, or is it specifically with subprime auto loans? david: i think this is the case of a couple bad apples ruining it for the rest of people. in this case, because there is such a thirst in demand for bonds with yield, there have
been new entrance into the space . a couple of them, some of these new marginal players are saying, hey, there is demand for these loans. we are originating them. we want to be in the game, too. the delinquencies and defaults on the bonds that they have issued have been a lot worse than other ones, such as ally. players, the new increase the competition and start driving down the quality. we have seen deals come to market with very low fight go scores -- low fico scores, and in some cases, no credit scores at all. alld: some people joke, you need is a posted get -- a pulse to get -- a pulse right now to get an auto loan. the bigger players, ally and istander, their collateral
performing not so bad. it does there watching -- bear watching. tracy: you brought this up earlier in the segment. we have not seen the market for mortgage-backed bonds, non-agency bonds, those that are not backed by fannie mae and freddie mac recover at all. it's been something like eight years since the financial crisis, and the proportion of bonds that don't come with the u.s. guarantee is still incredibly low. is that affecting the search for your behavior we have seen in structured credit? david: it is. in 2006, there were more nonagency mortgages issued than agency. 98% of see it is 97%, all mortgages being sold into fannie and freddie. there are a couple reasons why this is happening. investors are really fearful of what happened last time. there is not a lot of
consistency as far as reps and warranties. the servicing behavior was a little suspect. a lot of investors feel like there is nobody looking out for them. the other big point of what's happening is, these loans are worth more to banks to hold them on their own balance sheet than they are to be securitized and sold into the market. we talk about bank loan growth a lot. banks need loans. the ones that are originating ones that are not backed by fannie and freddie are just saying, hey, we will originate, hold on balance sheet, and try to improve our nim. atre is a lot of headwind play. yield inhere is no this market, because it doesn't exist, it's about 10% of what it was 10 years, 15 years ago, they are having to go to other places . subprime auto, see mbs-- cmbs. they are having to find other outlets where underwriting is a
lot more loose. one example is subprime auto. always asksw alix you to do bond math. she's going to ask you to do balance sheet arbitrage math any second. david schawel, thanks a lot. alix: coming up, we look at what's next for all the oil being stored in floating vessels. is it ready to come back and flood the market? ♪
a very big risks to the oil market, floating storage -- very big risk to the oil market, floating storage. you are looking at oil tankers that are storing oil in the middle east gulf. the idea is that the cost to store oil right now on sea is not very economic. it's cheaper now to release it into the market. deutsche bank says there may be an additional 31 million barrels of inventory that are currently floating that asld be drawn down, as much 330,000 barrels per day of incremental supply. you've got to flood the market. that's a risk. tracy: does that eventually end up being good for supply demand? instead of having oil locked up and waiting in the wings, it has gone out into the market. prices might fall in the short-term, but it, in the long run, alleviates the
supply-demand imbalance. alix: this is a huge flood in a short-term that the market is not anticipating. tracy: for my deep dive, i have something slightly different, one of the weirdest charts you will see in u.s. economics right now. now that i have built your expectations high, let me disappoint you. in purple, we have the atlanta fed gdp now estimate. it is falling quite a bit today. they revised their full-year gdp estimate after we saw that disappointing personal spending data early this morning. in the meantime, goldman's u.s. economic surprise index is at something like the highest since 2014. we have all these positive surprises coming through in the data, but they aren't necessarily feeding through into the gdp numbers. alix: does that mean analysts are just wrong? tracy: at some point, one of these is going to be right. it just depends which one. alix: coming up, despite mom -- mounting losses, it is not all
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the flower power cruise, february 27th, 2017. let your freak flag fly. don't miss the grooviest trip at sea. closing justrkets tired today. of the paul allen is in sydney. good morning, pal. paul: a bit of a mixed bag this morning. kongalia and hong returning from the four-day easter break. chinese banks will be in focus all week with all of the reporting earnings. china's bank of communications will be first. it is not expected to be great news. profit games probably came to an end in 2015 and 2016 will not
be much better with bad loans closing up relative to dividends. alix: a lot out of japan, including the unemployment rate. what can we expect? paul: we are expecting that to hold at 3.2%. a falling unemployment rate will be welcoming for not only the obvious reasons, but it means higher wages and higher inflation. higher inflation is the holy grail of the bank of japan with his 2% inflation cycle quite some distance away. there is little evidence of that happening. the annual wage negotiation that concluded this month does not have a lot of evidence that wage growth is increasing. we are expecting retail trade out of february for japan and household spending is another data point for japanese inflation.
i am paul allen in sydney. alix: now for a check and where u.s. markets ended the day. all across the board was flat and volume was very light. s&p, it wasthe down by 30%. a lot of markets closed for the easter holiday. you have energy, utility leading the decline. materials are higher on the day. it feels like a tame market in equities. some movement in currencies, but equities is slightly boring. alix: way to sell it. the dollar rally has been one of the biggest headlines of the day and of the last week. as well as commodities. you had oil trading around $40 a barrel. wheat was a rally for most.
tracy: i know you are into wheat. i get it. the interesting thing about the dollar rally is we have not seen oil react that much to a weaker dollar. normally we get this dynamic that whatever the dollar goes, so goes oil, credit, stock. this is breaking the pattern. it is difficult to read anything into one day given that european markets are largely closed. alix: we have a busy week. janet yellen is speaking. not a lot position being taken on when you want to hear about a rate hike? let's get to mark crumpton, who is awaiting a press conference in washington dc confirming the shooting in the capital. mark: early this afternoon, we had heard a report of gunshots fired at the u.s. capitol visitor center complex. there were early reports that police officer
has been wounded. the story is we know is and armed suspect attempted to enter the complex. the gun apparently set off a metal detector. shots were fired. the gunman, the alleged gunman was wounded and we are hearing reports that a visitor to the center may have received shrapnel injuries. there was a time where the u.s. capitol was in lockdown. the white house and capitol hill were in lockdown but the all clear has been given. reporters have been telling us that there has been an increased security presence in washington dc in the wake of horrific terror bombings in brussels, belgium. police are saying this appears to have been an isolated incident. what we are hearing from capitol suspect wasarmed wounded and in custody.
that suspect attempted to enter the u.s. capitol visitor center complex and that set off a metal detector. gunshots were fired, a suspect wounded and taken into custody. officers backtracking on earlier reports that a capital police officer had been wounded. they are saying that is not the case and a visitor to the center likely suffered shrapnel injuries. we are waiting for a news conference by capitol and metro police. as soon as that begins, we will bring that to you. ♪
seeing borrowing costs fall. tracy: yields keep plunging. joined now by cablo. when i look at petra bus -- petrobras, i think this is a risky borrow. what is going on? petrobras is a mix of everything we have seen going on. first it was oil prices. second one, shaving all of these problems outevere of china. we had a strong dollar. there is also news out of brazil. it was very much inverted. now it has a normal slope. that means that -- it does not
mean that all problems are gone. when you are talking about holding patterns, they are great for emerging markets. we are facing everything but holding patterns. oil prices are going lower. we are facing the dollar getting stronger. china slowing down. nothing was holding. holding sudden, the pattern takes that away and capital comes back into great value. alix: the spread on emergent market high yields have both heightens and that it is tighter when it comes to market high-yield. does that mean it is riskier to lend money to the u.s. than emerging markets? pablo: it makes sense when you look name by name. market has to do with energy. emerging markets, you have
parent support. price at the same which the companies in the u.s. share prices are being sold to consumers. there you have an internal captive market. guys in north dakota are selling at the spot price in emergent markets. that is the price consumers have to pay. there is a subsidy from the consumer unions to the company. it is easier for petrobras to get credit then u.s. high-yield energy companies. there is a reason. tracy: you talk about e.m. investors judging bonds and credits on a credit by credit basis. how much differentiation have we seen in this em debt rally? every singleing at emerging and frontier market on a day-to-day basis, but it feels like it has been pretty
generalized. pablo: you have seen significant components of the whole story, and high-yielders have them quite well. there is where we saw most of the stress in the past. it is local markets doing particularly well in these rallies. this is because of the strong dollar. devaluationuse of out of china. the yield you were capturing with the local market is very good. alix: we have seen over the last few weeks that there are more flows into debt showing emerging markets than equity in emerging markets. a very staggering shift. you feel there is more rotation to this? step is think the first the removal of the headwinds. that is very good.
where we are going to start see tailwind, that potentially could be better for equities. we need to see growth coming back. tracy: they stopped being bad, but they are not awesome. pablo: you could call it that. stuff not being that was particularly great. if you look at the local market with yields of about 10%, when the currency depreciated relative to the dollar, we are here today. tracy: we have seen this amazing rally. will it continue? what happens if the u.s. dollar starts strengthening? pablo: that would be one of the headwinds we have seen. the question is how much stronger can the u.s. dollar get? we have seen it change with sensitivity to the fed for a strong dollar. here it can be more reactive. it is a bit of a self compensating mechanism. the ecb and bank of japan have stopped being so aggressive with
the idea of negative rates. you are starting to get a little bit of a better floor for the currencies in the end, as well as for commodities. alix: we have seen emerging-market currencies rally as oil has rallied as well. do we need to see the dollar fall anymore or keep seeing stabilization levels in order to ignite an em rally? market would be great for rallies. the yield will come back into play. one of the very important things we are seeing is that currencies are closing high. as long as volatility stay high, not many people will want to venture into the local market. diminishes, the
joining us is anthony. you take a look at oil and gas rates. totally fallen off a cliff. what happened to those workers? i hear they are construction crews, uber drivers. anthony: based on the data, there are two different categories. both categories have seen a decline in labor, but not as much as 70%-80% decline in rig count. if you assume a 1-1 relationship labor, andipment and labor has not declined as much. alix: you find extraction crews have held up well. it has been more of an unemployment in the services. anthony: that is right. if you look at 1986 when the last supply let downturn in oil price. what you saw was on the extraction category, labor in
the u.s. went from 250,000 people to 200,000. it took about 10 years for labor to go back to 100,000. now we are back to 200,000. it takes a longer time to rationalize the sector. alix: i have to interrupt you. we have a press conference that is happening in washington concerning the shooting on capitol hill. >> are screened through the capitol visitor center. today at approximately 2:39 p.m., an adult male subject entered the north screening facility of the capital screening center. during routine screening, the individual true what appeared to be a weapon and pointed it at officers. fired and struck the suspect, who was treated by medical personnel. the suspect was taken into custody and transported to
the hospital for treatment. the suspect is currently undergoing surgery. his condition is unknown at this time. a weapon was recovered on the scene. the congressional complex was locked down and u.s. cp ordered a shelter in place. based on the initial investigation, at approximately 3:40 p.m. the lockdown was lifted in all buildings except for the cbc, which remains processing for crime scene. suspect's vehicle has been located on capitol grounds and will be cleared of hazards pending the serving of a search warrant foran uninvolved -- warned. and on involved female bystander suffered minor injuries and was transported to the hospital. no officers were injured. it is not been determined how
many officers fired their weapons. officertol police claimed responsibility and metro police officers are looking into the matter. i want to stress that while this is preliminary, based on the initial investigation we believe that this is the act of a single person who has frequented the capitol grounds before and there is no reason to believe that this is anything more than a criminal act. as additional information is gained, i will provide as much as i can through our public information office. i want to assure the american and visiting public that the u.s. capitol police officers continue to protect the capitol for all who visit. we expect regular business
tomorrow morning. people can safely visit the withd states capitol normal officers. as we get more information, i will be happy to provide it through our normalpio suspects. >> is this suspect known to capitol police? >> i have not received confirmation, but we believe that the suspect is known to us. >> how is he known? >> previous contacts. >> there is word that he disrupted a house meeting last fall. can't say. >> there has been a lot of talking about brussels. the checkpoint was identified to -- was provided to identify a threat before i got into the capitol. did that work today? >> it appears that the screening
process works the way it was supposed to. again, this is preliminary and i know you want as much information as i can give you, but without confirming things, i don't want to give you bad information. i would rather give you the information when we confirm it. i will try to provide as much information as i can so you can get it out to the public. i want to thank you very much. that was the u.s. capitol police chief speaking to reporters on the day when a man who the she said was known to to enter thempted u.s. capitol visitor center. did setwas armed and off a metal detector. shots were fired. the suspect was wounded and taken into custody. the chief also saying that in uninvolved bystander believed to be between 35-45 years old suffered minor injuries and was
taken to a hospital. the chief adding that he is not sure how many officers fired their weapon in that encounter with the adult male who, according to the chief, was known to officers. he said that more information would be forthcoming, but right now, according to officers, no capitol police officers were injured in this shooting today in washington dc. alix: back with anthony yuen. we were talking about the discrepancy between oil counts dropping and employment in the extraction industry is actually holding up well. does that mean there are more layoffs to come or they can respond better when prices rise? anthony: both. if you look at several years ago in the banking sector, companies prepared for the potential of turn. they retained more workers, especially professional ones over 18. if the rebound does not come back, then 18 will probably be
there and they may assemble a b team and c team. it will take time and more resource to get them together. alix: the chatter right now is how quickly and how fast can u.s. production be shut in and how long will it be shut in for? does this kind of data change your view? will we see more u.s. production faster? anthony: i think responsibly faster on two issues. one is on the labor side. there is still labor around the market. also equipment and the financing. there are equity races for some you p companies as well. when opportunity presents itself, companies may draw again. alix: the other area is ducks. you drill the well, you did not frack it.
you have about 4000 of these wells sitting in the u.s.. you can get the crew to back. these wells can be up and running in a short amount of time. anthony: it might take a few weeks to a few months to do that, depending on where and when you want it. if you have a lot of those ducks, it may take a little longer. alix: how long do you think the market will be tight for? anthony: i think it depends on how tight. -- 100,000 barrels a day tight? you also have very high inventory as well. that my cushion it from a bad impact. alix: what is your call for oil prices in the short and long-term? anthony: this year we expect prices to average $40. next year, we expect prices to
alix: don't miss this. announcedjobless rate tonight at 7:30 p.m. and retail rates at 7:50 p.m. our people starting to spend more? tracy: we did see rumors of stimulus on the way. it will be interesting to contrast that. in the u.s., don't miss earnings tomorrow before the bell and s&p case schiller earnings at 9:00.
i'm al hunt. >> and i mark halperin. >> let me give an answer for the american people. who cares? who cares what donald is tweeting late at night? mark: hello from wisconsin. hillary clinton's campaign is playing chances in the primary year. don't tell that to hillary clinton herself. speaking tonight at madison, later in the walking, and spending a couple days here at least w